STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2021

The Company has a stock incentive plan whereby the Board of Directors may grant stock options or restricted stock units to employees, directors and consultants to purchase shares of the Company’s common stock under the 2011 Equity Incentive Plan (Plan). The Company has authorized 10,113 common shares to be issued under the Plan. The Plan permits the granting of incentive stock options and nonqualified stock options. The Company’s stock options vest based on terms in the stock option agreements and generally vest over four years and have a term of ten years subject to the continuous service to the Company by the optionee. Incentive stock options may be granted at an exercise price of not less than 100% of the estimated fair value of the stock at the date of the grant as determined by the Company’s Board of Directors. If incentive stock options are granted to a stockholder who owns more than 10% of the voting power of all classes of stock of the Company, the exercise price of the incentive stock options must be at least 110% of the estimated fair value of the common stock at the date of the grant.

In November of 2020, the Board approved the amended and restated Plan, which provides for, among other things, the ability of the Company to grant restricted stock units (RSUs). Each RSU award vests based upon the satisfaction, during the term of the RSUs, of two requirements: length of service and a liquidity event defined as a change in control or a qualified IPO. No compensation expense has been included for RSUs as the vesting conditions are not probable.

In June of 2021, the Company granted 1,800 performance-based RSUs to the Company’s founders (the Founder Awards). The Founder Awards vest upon the satisfaction of both a service-based condition and a performance-based condition and generally are settled 1 year after vesting. The service-based condition is satisfied as to 25% of the Founder Awards on each anniversary of the completion of the IPO, subject to the continuous service of the founders through the applicable date. The performance-based condition will be satisfied only if the closing price of the Company’s Class A common stock reaches certain stock-price hurdles that are significantly in excess of the Company’s current valuation over a period of 10 years. The Founder Awards are divided into ten equal tranches with each tranche becoming eligible to vest upon achievement of the specified stock-price hurdles. The estimated amount of unrecognized compensation expense for the Founder Awards as of June 30, 2021 was approximately $100,543, which the Company

expects to recognize over a period of 1 year to 7 years, depending upon the achievement of the stock-price hurdles. No compensation expense was recorded as of June 30, 2021 as the performance-based vesting conditions were deemed not probable.

Stock option activity as of June 30, 2021 is set forth below:


	Number of options	Weighted- average exercise price		Weighted- average remaining contractual life (years)	Aggregate intrinsic value





Options outstanding at January 1, 2021	8,365	$	10.68	7.47	$	230,596
Granted	72	52.80
Exercised	(500)	6.62
Repurchased	(220)	4.81
Forfeited and expired	(51)	13.12
Options outstanding at June 30, 2021	7,666	$	11.49	7.12	$	596,343
Options exercisable at June 30, 2021	4,431	$	7.21	6.09	$	363,687

The total intrinsic value of options exercised was approximately $17,970 for the period ending June 30, 2021. There were 114 options available for grant at June 30, 2021.

RSU activity for the six months ended June 30, 2021 is set forth below:


	Share units	Weighted- average grant date fair value per share





Outstanding at January 1, 2021	34	$	38.08
Granted	561	52.58
Vested	—	—
Forfeited	—	—
Outstanding at June 30, 2021	595	$	51.76

As of June 30, 2021, there was approximately $23,972 of unrecognized compensation cost related to stock options granted under the plan. That cost is expected to be recognized over a weighted-average period of approximately two years. The amount of unrecognized compensation expense for RSUs as of June 30, 2021 was $30,783 with a weighted average remaining contractual life of four years, for a total unrecognized compensation expense of $54,755.

In February of 2021, the Company initiated a tender offer which allowed employees to sell up to 10% of their vested options or shares back to the Company at selling price of $59.77, which was above fair market value of $38.08. The Company paid $13,479 and incurred $5,275 of additional compensation expense related to this tender representing the difference between the aggregate selling price and fair market value of the options and shares sold, and a $7,335 increase to Additional paid-in capital. As a result of this tender, 220 options were put back into the option pool and 23 shares were retired with an $868 increase to Additional paid in capital.

Compensation expense is recognized over the service period, which approximates the vesting period. Total compensation expense was $2,907 and $5,458 for the three and six months ended June 30, 2021, respectively and $1,681 and $2,835 or the three and six months ended June 30, 2020, respectively.

Stock based compensation expense is included in the consolidated statements of operations as shown in the following table:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Cost of Revenue	$	—	$	—	$	2	$	1
Research and development	1,105		532		2,216		979
Sales and marketing	72		107		140		180
General and administrative	1,730		1,042		3,100		1,675
Total	$	2,907	$	1,681	$	5,458	$	2,835

Nominal amounts of stock based compensation expense is capitalized into capitalized software.